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Profit Determination In U.K. Manufacturing

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  • CONYON, M.
  • MACHIN, S.

Abstract

This paper examines the determinants of profitability in 90 U.K. manufacturing industries over the period 1983-86. It considers the importance of labour market characteristics in determining profits and how their inclusion in a profitability equation affects the concentration-margins relationship. the empirical work also pays detailed attention to the endogenous nature of variables derived from structural Industrial Organisation models and we report instrumental variables estimates of profitability equations in which there is a significant role for labour market characteristics. Indeed, both unionisation and unemployment are found to depress profit margins. The impact of concentration on profitability is seen to be biased downwards when these variables are not considered.

Suggested Citation

  • Conyon, M. & Machin, S., 1989. "Profit Determination In U.K. Manufacturing," The Warwick Economics Research Paper Series (TWERPS) 330, University of Warwick, Department of Economics.
  • Handle: RePEc:wrk:warwec:330
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    File URL: https://www2.warwick.ac.uk/fac/soc/economics/research/workingpapers/1989-1994/twerp330.pdf
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    References listed on IDEAS

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    1. Barry T. Hirsch & Robert A. Connolly, 1987. "Do Unions Capture Monopoly Profits?," ILR Review, Cornell University, ILR School, vol. 41(1), pages 118-136, October.
    2. Levy, David, 1987. "The speed of the invisible hand," International Journal of Industrial Organization, Elsevier, vol. 5(1), pages 79-92, March.
    3. Voos, Paula B & Mishel, Lawrence R, 1986. "The Union Impact on Profits: Evidence from Industry Price-Cost Margin Data," Journal of Labor Economics, University of Chicago Press, vol. 4(1), pages 105-133, January.
    4. Addison, John T & Hirsch, Barry T, 1989. "Union Effects on Productivity, Profits, and Growth: Has the Long Run Arrived?," Journal of Labor Economics, University of Chicago Press, vol. 7(1), pages 72-105, January.
    5. Blanchflower, David G & Oswald, Andrew J, 1988. "Profit-Related Pay: Prose Discovered," Economic Journal, Royal Economic Society, vol. 98(392), pages 720-730, September.
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    Keywords

    profit ; manufacturing ; labour market ; probability;

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